Indonesia to unveil fuel price increase plans

By Telly Nathalia

JAKARTA (Reuters) - Indonesia was set to unveil plans on Thursday for raising fuel prices after a soaring subsidy bill battered the budget, but authorities are seeking to calm protests by giving cash handouts to poor families.

The government has said it plans to raise fuel prices by a maximum 30 percent, a move that has already sparked protests in several parts of the country where price hikes are a sensitive issue.

The government was due to hold a news conference at 0900 GMT on the fuel price hike. No further details were available.

"The government will increase the fuel price by maximum 30 percent," Finance Minister Sri Mulyani Indrawati told reporters late on Wednesday.

"The government saw that the trend of oil prices will cause subsidies to be higher than the budgeted 126.8 trillion rupiah ($13.65 billion). We estimate if oil prices are like this, it can reach above 190 trillion rupiah," she said.

Indonesia, which has some of the lowest fuel prices in Asia, provides heavy subsidies for fuel that help shield consumers from the market price of crude.

But surging energy and food prices are pushing up the subsidy bill and driving up inflation, forcing the government to act.

With crude prices hitting around $124 a barrel, compared with the government's 2008 budget estimate for an average oil price of $95 a barrel, fuel and energy subsidy spending is expected to top $20 billion, a fifth of total government spending.